FRANCE'S ENERGY SECURITY POLICY

C O N F I D E N T I A L SECTION 01 OF 03 PARIS 000018

SIPDIS

SIPDIS

STATE FOR INR, EB/ESC, EUR/WE, EUR/ERA, NEA/NGA

E.O. 12958: 01/03/2022
TAGS: PINR EPET ENRG KPRP ECON FR
SUBJECT: FRANCE'S ENERGY SECURITY POLICY

Classified by Econ Minister Thomas White for Reasons 1.5 (d) and
(e).

Ref: a) State 181979, b) Paris 7604


1. (C) Summary. The GOF is enhancing its energy security
through diversification of supply sources and increasing the
percentage of nuclear and renewables in its energy mix, while
decreasing the use of oil and coal. While these changes are
guided partially by a desire to become more energy independent,
it is also driven by France's Kyoto climate change obligations.
The Government also wants to reduce France's energy consumption
by a factor of four by 2050. France backs the development of
cross-border power lines between EU members to improve their
ability to cope with the shut down of a power plant or key power
lines. The GOF liaises regularly with energy power producers
and distributors to work out contingency plans in case of supply
disruptions. It also manages strategic oil and gas reserves.
End summary.


2. (C) This cable responds to reftel request for information on
France's energy security policies, with information garnered
from meetings with the Ministry of Economy, Finance and Industry
General Directorate for Energy and Raw Materials Assistant
Secretary-equivalent Sophie Galey-Leruste, Oil and Gas Supply

SIPDIS
Office Head Fabrice Noilhan, and International Strategy Bureau
Head Jean Lamy, as well as GOF information provided during those
December meetings.

France's Strategy to Improve Energy Independence


3. (U) Since the two OPEC oil price increases in the 1970s, a
leading concern of French energy policy has been to reduce
France's vulnerability to supply disruptions. This has entailed
a three-pronged strategy: reducing the country's dependence on
oil by diversifying its energy mix; increasing the share of
imported energy from dependable countries such as the UK and
Norway; and raising the share of the energy mix met by domestic
production. One consequence is that the government has
encouraged the replacement of oil by electricity (most of it
domestically nuclear-generated) and gas (mostly imported) as a
source of domestic heating.


4. (U) France's energy sector accounts for 2 percent of total
GDP and employs 233,000 people. In 2006 primary energy
consumption amounted to an estimated 276 million tons of oil
equivalent (TOE),making France's energy market the
second-largest in the EU after Germany. Nonetheless, France is
poor in natural energy resources, in contrast to several
European Union (EU) countries that benefit from raw materials
(coal in Germany and Spain, oil, gas, and coal in the United
Kingdom (UK),and gas in the Netherlands). France imports
almost all of its oil, natural gas, and coal needs.

Nuclear Power - Strong and Now Due to Increase



5. (SBU) To ensure the security of its energy supplies, France
gives priority to developing nuclear energy and renewable
energies. Locally produced nuclear power generates eighty
percent of France's electricity needs and forty percent of its
overall energy needs. After the first oil shock, when oil
accounted for 61 percent of France's energy needs, the GOF
commissioned 59 nuclear power plants, so that now, oil accounts
for only 34 percent of France's needs, mostly in the
transportation sector. In the 1980s, France overtook Japan and
the Soviet Union to become the world's second-largest producer
of nuclear-generated electricity after the U.S.


6. (C) France just commissioned its first nuclear power plant in
over twenty years, due to be completed in Normandy in 2020. The
French public is much more accepting of nuclear power than are
Americans. The GOF held two public sessions prior to
commissioning the nuclear power plant. The French public had
little resistance to the plant itself, but the public debate
focused on the routing of the high tension wires carrying the
electricity from the plant, with no one wanting the wires
passing through their neighborhood. With the progress in
nuclear power, domestic production now supplies half of France's
energy needs. France is a net exporter of electricity, but its
dependence on imported oil makes it a net importer of energy
overall.

Renewables Also Favored


7. (SBU) France wants to increase the percentage of renewable
energy in its energy mix. Renewable energy, such as hydro,
biofuels, solar power, and wind power accounts for seven percent
of France's energy mix, and the GOF intends to increase this

PARIS 00000018 002 OF 003


percentage to ten percent within the next five years. The GOF
is emphasizing the development of biofuels, since it believes
that this is the most cost effective alternative. The GOF would
also like to increase the number of windmill farms, but the "not
in my backyard" (NIMBY) syndrome is hampering progress. The GOF
is planning for the establishment of new windmill farms off the
Atlantic Ocean coast as a result.

Diversification in Sourcing Gas


8. (C) The GOF also wants to decrease the chances of supply
disruption of gas by diversifying the sources of supply,
ensuring that no more than one-third comes from any one
supplier, with Norway, the Netherlands, Russia, and North Africa
being the main suppliers. Gas accounts for 15 percent of
France's total energy needs. Norway is the largest supplier,
with 26 percent of France's gas market. Netherlands, via other
North Sea fields, supplies another 20 percent. On December 19,
Gaz de France (GDF) and Gazprom signed a contract for Gazprom to
deliver 12 billion cubic meters (bcm) of gas a year to GDF until
2030 and permit Gazprom to market 1.5 bcm a year directly to
French industrial customers. This agreement will boost
Gazprom's strategy of increasing margins by selling gas directly
to end-users rather than wholesaling it to distributors. GDF
also contracted to take 2.5 bcm of gas a year from 2010 from the
Nordstream pipeline, which will connect Russia directly to
Germany. With this accord, Gasprom cemented its status as the
second largest supplier of gas to France, accounting for about
23 percent of France's gas supply. This percentage does not
differ significantly from the historical average. During the
week of December 11, GDF also signed a 20 year gas supply
contract with Algeria's state-owned oil and gas company,
Sonatrach, which will supply about one bcm of natural gas a
year. Algeria supplies 13 percent of France's gas market.
Nigeria and other markets account for the remaining 19 percent.


9. (C) France's gas infrastructure has five regions that are not
interconnected. The GOF wants to ensure that infrastructure is
built so that only two regions are not interconnected. The GOF
is also expanding its infrastructure of plants that can turn
liquefied natural gas (LNG) back to gas. France now has two
regasification plants. It plans to add one on the Mediterranean
Coast and two to three on the Atlantic Coast.

Oil Supplies Cut and Diversified



10. (C) France also diversified its oil supplies after the 1970s
oil shocks. In 1973, 71.5 percent of its oil came from the
Middle East. In 2004, only 28 percent originated there. France
sourced another 29 percent of its oil from the North Sea, 23
percent from the former USSR, 13 percent from Sub-Saharan
Africa, and 7 percent from North Africa. Our interlocutors were
impressed with the USG's transparency in publishing oil stocks
believing that increased transparency can diminish volatility of
energy prices. France seeks to publish oils stocks on the
European level. This effort would also include completing an EU
directive that would increase transparency on gas storage
facilities.

Coal Use -- Low and Decreasing


11. (U) France still has reserves of coal, but the last coal
mine was closed and the state coal company, Charbonnages de
France, is being wound down. This is partly for economic
reasons (coal is more expensive in France than alternative
sources) and partly on environmental grounds so that France can
cut its carbon emissions to meet Kyoto Protocol emission
targets. Coal accounts for only five percent of France's energy
needs and GOF officials expect that this percentage will
decrease further.

EU Electricity Interconnection Increases Security


12. (SBU) France supports a proposed EU directive on the
security of electricity supply and investment in infrastructure.
France backs the approach of developing cross-border power
lines between EU members to improve their ability to cope with
the shut down of a power plant or key power lines. In addition,
France believes European countries should invest in
power-generation capacity. As an early step, the GOF advocates
carrying out, at the EU level and in each Member State, a
forward-looking supply and demand analysis to identify energy
bottlenecks and imbalances in the medium term.

Reduction of Energy Consumption Can Increase Energy Security


13. (U) France has a goal of reducing greenhouse gas emissions
by three percent a year to reach a fourfold reduction by 2050

PARIS 00000018 003 OF 003


and will use technical, technological, economic, and social
means to accomplish this aim. The Energy Policy Act (EPA) of
July 2005 specified more near-term goals. The EPA sets a goal
of lowering final energy intensity by two percent per year by
2015 and by 2.5 percent per year from 2015 to 2030. France has
planned a substantial increase in the public and private
research effort in new energy technologies to help it reach
these goals, specifically in bioenergy, fuel cells, clean cars,
solar power, positive energy buildings, carbon capturing and
sequestration, and generation four nuclear reactors. The GOF
created the National Research Agency and the "Agence de
l'innovation industrielle," which has a budget of 2 billion
euros from 2005-2007 (USD 2.6 billion),to help research these
areas.


14. (U) The GOF has also established two "competitiveness
clusters" (or "poles de competitivite" in French) to encourage
the development of renewable energy technologies. These "poles"
harness the research that the private sector is doing, combine
it with the capacity offered by research and academic
institutions, and offer government financing, to make innovative
advances in specified fields.

The State's Large Role in the Energy Sector


15. (C) The state plays a prominent role in the energy sector
and France has long been one of the EU's most resistant
countries to liberalization and privatization. Although it
reduced its holdings in the two companies in 2006, the state
retains majority states in both Electricite de France (EDF) and
Gaz de France(GDF). The GOF sponsored an energy law that
permitted the GOF to decrease its stake to a third in GDF so
that it could merge with private French energy group Suez, but
the courts have delayed the merger until July 2007. At that
time, a new President and parliament could be hostile to the
merger and the GOF decreasing its share in GDF. While the
European Commission wishes to decouple electricity production
and distribution, press reports indicate that the GOF is
pressuring it not to proceed with these plans.

GOF's Plans to Reduce Vulnerability to Terrorist Attacks



16. (C) While the GOF does not believe that terrorists are
targeting their energy infrastructure, it takes seriously the
possibility that they might do so and has developed plans to
reduce its vulnerabilities. As part of this plan, the GOF
interacts regularly with its energy companies to assess and
combat terrorist threats to oil and gas production and exports.
For instance, the GOF requires each power plant to inform the
GOF of its plan for a six month disruption. The GOF also has
strategic oil and gas reserves that exceed International Energy
Agency (IEA) recommendations. France also has a national plan
for security with different colors representing the terrorist
threat (similar to that devised at the Department of Homeland
Security). France was at "code red" in early December (the
highest threat level),which required all energy installations
to enhance security.


17. (C) The GOF is identifying France's most vulnerable
energy-related sites, such as refineries, import pipelines, and
oil storage facilities, and determining how further to secure
those facilities. For example, all of the gas from Norway
arrives in France in one pipeline and disruption would be
significant if the pipeline were attacked. The GOF is therefore
insuring that gas storage infrastructure increases along with
increasing consumption. The GOF is confident that it could
weather a disruption without difficulty. The GOF also has a
contingency plan in place in case of simultaneous attacks on
several facilities, which involves reducing consumption and
prioritizing users.


18. (C) France does not have concerns about the security of
transport of energy supplies, but it believes that diversity of
supplies can diminish potential threats. GOF officials believe
that the transportation of energy is a very small percentage of
global emissions and does not have concerns about
environmentally sound transport. However, it is making efforts
to reduce sulfur in all of its maritime transportation.


HOFFMAN